CITY OF Long Beach Airport
LONGBEACH 4100 E. Donald Douglas Drive, Floor 2, Long Beach, CA 90808 (562) 570-2619
C-9
August 16, 2022
HONORABLE MAYOR AND CITY COUNCIL
City of Long Beach
California
RECOMMENDATION:
Receive and file the Annual Audit Report for the Long Beach Airport Passenger Facility Charges (PFC) program for Fiscal Year Ended September 30, 2021. (Districts 4, 5)
DISCUSSION
Federal regulations allow a public agency that operates a commercial service airport to charge a Passenger Facility Charge (PFC), which is a "per enplaned passenger" fee, for expenditure on eligible non-revenue generating airport capital improvements. In 2003, the Long Beach Airport (Airport) implemented the PFC to fund eligible airport capital improvement projects.
PFCs are allowed only for approved airport capital project costs that meet the program objectives related to safety, security, capacity, noise mitigation, and competition. The Federal Aviation Administration (FAA) must approve the imposition and use of PFC revenue through an application process.
In accordance with federal regulations, an audit of the Airport's PFC program is conducted each year by an independent auditor to obtain reasonable assurance that the Airport complied with the PFC program requirements. KPMG, LLP (KPMG), is the City of Long Beach's (City) independent auditor that also audits the City's Comprehensive Annual Financial Report and conducts the annual Single Audit for grant funded programs. The annual audit report for Airport's PFC program for Fiscal Year 2021 is attached. The audit resulted in no program- related findings and no questioned cost for the reporting year 2021.
This matter was reviewed by Principal Deputy City Attorney Richard F. Anthony on July 19, 2022 and by Budget Analysis Officer Greg Sorensen on July 22, 2022.
TIMING CONSIDERATIONS
City Council action on this matter is not time critical.
FISCAL IMPACT
There is no fiscal or local impact associated with this recommendation. This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities.
HONORABLE MAYOR AND CITY COUNCIL
August 16, 2022
SUGGESTED ACTION
Approve recommendation.
Respectfully submitted,
CYNTHIA GUIDRY
DIRECTOR, LONG BEACH AIRPORT
ATTACHMENT
APPROVED:
THOMAS B. MODICA
CITY MANAGER
KPMG
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedules of Passenger Facility Charges
Collected and Expended and Interest Credited
Year ended September 30, 2021
(With Independent Auditors' Reports Thereon)
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Table of Contents
Page(s)
Independent Auditors' Report on Compliance for the Passenger Facility Charge Program; Report on Internal Control over Compliance; and Report on Schedules of Passenger Facility Charges Collected and Expended and Interest Credited in Accordance with the Passenger Facility Charge Audit Guide for Public Agencies 1-2 Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 3-4
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited - Year ended September 30, 2021 5-6
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited - Quarters ended December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 7-8
Notes to Schedules of Passenger Facility Charges Collected and Expended and Interest Credited 9
Schedule of Findings and Responses 10
KPMG
KPMG LLP
Suite 1500
550 South Hope Street
Los Angeles, CA 90071-2629
Independent Auditors' Report on Compliance for the Passenger Facility Charge Program; Report on Internal Control over Compliance; and Report on Schedules of Passenger Facility Charges Collected and Expended and Interest Credited in Accordance with the Passenger Facility Charge Audit Guide for Public Agencies
The Honorable Mayor and City Council
The City of Long Beach Airport Enterprise Fund, California:
Report on Compliance for the Passenger Facility Charge Program We have audited the City of Long Beach, California Airport Enterprise Fund's (the Airport) compliance with the types of compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies (the Guide), issued by the Federal Aviation Administration, that could have a direct and material effect on the Airport's passenger facility charge program for the year ended September 30, 2021.
Management's Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to the passenger facility charge program.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance for the Airport's passenger facility charge program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of the Guide. Those standards and the Guide require that we plan and pertorm the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the Airport's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the passenger facility charge program. However, our audit does not provide a legal determination of the Airport's compliance.
Opinion on the Passenger Facility Charge Program
In our opinion, the Airport complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program for the year ended September 30, 2021.
Report on Internal Control over Compliance
Management of the Airport is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Airport's internal control over compliance with the types of requirements that could have a direct and material effect on the passenger facility charge program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG
of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Airport's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of the passenger facility charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of the passenger facility charge program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the passenger facility charge program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guide.
Accordingly, this report is not suitable for any other purpose.
Report on Schedules of Passenger Facility Charges Collected and Expended and Interest Credited We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Long Beach, California (the City), as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our report thereon dated March 29, 2022, which contained unmodified opinions on those financial statements.
The City of Long Beach, California Airport Enterprise Fund is included in the aggregate remaining fund information of the City. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedules of passenger facility charges collected and expended and interest credited are presented for purposes of additional analysis as required by the Guide and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules of passenger facility charges collected and expended and interest credited are fairly stated in all material respects in relation to the basic financial statements as a whole.
KPMG LLP
Los Angeles, California
June 17, 2022
2 KPNG
KPMG LLP
Suite 1500
550 South Hope Street
Los Angeles, CA 90071-2629
Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
The Honorable Mayor and City Council
The City of Long Beach Airport Enterprise Fund, California:
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business- type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Long Beach, California (the City) as of and for the year then ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 29, 2022. The City of Long Beach Airport Enterprise Fund (the Airport) is included in the aggregate remaining fund information of the City.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the City's financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's aggregate remaining fund information is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
3 KPG LLP, a Delaware limited liability partnership and a mamber firm of the KPM global organization of independent member firs affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not
KPMG LLP
Los Angeles, California
June 17, 2022
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and
Expended and Interest Credited
Amended Application 03-02-C-04-LGB
Year ended September 30, 2021
Passenger facility charges collected $ 501,874
Interest credited (note 2) 2,011
503,885
Expenditures for passenger facility charge approved projects (592,597) Transfer of excess charges to application 11-06-U-00-LGB (note 4) (1,089,185) Transfer of excess charges to application 20-08-C-00-LGB (note 4) (125,751) Transfer of excess charges to application 20-09-C-00-LGB (note 4) (20,322,548) Change in unexpended passenger facility charges (21,626,196) Unexpended passenger facility charges as of September 30, 2020 26,106,339 Excess of passenger facility charges collected over charges expended as of September 30, 2021 $ 4,480,143
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and
Expended and Interest Credited
Application 11-06-U-00-LGB
Year ended September 30, 2021
Passenger facility charges collected $ 912,299
Excess charges transferred from application 03-02-C-04-LGB (note 4) 1,089,185 Interest credited (note 2) 6,913
2,008,397
Expenditures for passenger facility charge approved projects (2,008,397) Change in passenger facility charges
Unexpended passenger facility charges as of September 30, 2020 Excess of passenger facility charges expended over charges collected as of September 30, 2021 $ -
5 (Continued)
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and
Expended and Interest Credited
Application 20-08-C-00-LGB
Year ended September 30, 2021
Passenger facility charges collected $ 493,474
Excess charges transferred from application 03-02-C-04-LGB (note 4) 125,751 Interest credited (note 2) 2,695
621,920
Expenditures for passenger facility charge approved projects (621,920) Change in passenger facility charges -
Unexpended passenger facility charges as of September 30, 2020 Excess of passenger facility charges expended over charges collected as of September 30, 2021 $ -
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and
Expended and Interest Credited
Application 20-09-C-00-LGB
Year ended September 30, 2021
Passenger facility charges collected $ 1,223,185
Excess charges transferred from application 03-02-C-04-LGB (note 4) 20,322,548 Interest credited (note 2) 87,368
21,633,101
Expenditures for passenger facility charge approved projects (21,633,101) Change in passenger facility charges -
Unexpended passenger facility charges as of September 30, 2020 Excess of passenger facility charges expended over charges collected as of September 30, 2021 $ -
See accompanying notes to schedules of passenger facility charges collected and expended and interest credited, and report on compliance with requirements applicable to the passenger facility charge program and on internal control over compliance and schedules of passenger facility charges collected anc expended and interest credited.
6 CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited Amended Application 03-02-C-04-LGB
Quarters ended December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021 Deconor 1, Mao2 31, June 30, september 30.
2021 Total
Passenger facility charges collected $ 222,948 69,631 209,295 501,874 Interest credited (note 2) 1,182 308 521 2,011
224,130 69,939 209,816 503,885
Expenditures for passenger facility charge approved projects (312,842) (69,939) (209,816) (592,597) Transfer of excess charges to application 11-06-U-00-LGB (note 4) (1,089,185) - (1,089,185) Transfer of excess charges to application 20-08-C-00-LGB (note 4) (125,751) (125,751) Transfer of excess charges to application 20-09-C-00-LGB (note 4) (12,510,796) (5,322,935) (1,450,106) (1,038,711) 120,322,548) Change in unexpended passenger facility charges (13,814,444) (5,322,935) (1,450,106) (1,038,711) $_ (21.626.196) Unexpended passenger facility charges at beginning of quarter 26,106,339 12,291,895 6,968,960 5.518,854 Excess of passenger facility charges collected over
charges expended at end of quarter $ 12.291,895 6,968,960 5,518,854 4,480,143
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited Application 11-06-U-00-LGB
Quarters ended December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021 December 31, March 31, June 30, September 30,
2020 2021 2021 2021 Total
assenger facility charges collecte 227,764 684,535 912,299 (cess charges transferred from application 03-02-C-04-LGB (note . 1,089,185 - 1,089,185 Interest credited (note 2) 4,191 991 1,731 6.913
1,093,376 228,755 686,266 2,008,397
Expenditures for passenger facility charge approved projects (1,093,376) (228,755) (686,266) (2,008,397) =
Change in passenger facility charges - $
Excess of passenger facility charges expended over charges collected at beginning of quarter - -
‹cess of passenger facility charges collected ov
larges expended at end of quart $
7 (Continued)
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited Application 20-08-C-00-LGB
Quarters ended December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021 a0231 10230, September 30,
2021 Total
Passenger facility charges collected $ 337,060 126,557 29,857 493,474 Excess charges transferred from application 03-02-C-04-LGB (note 4) 125,751 125,751 - - -
Interest credited (note 2) 484 1,571 559 81 2,695
126,235 338,631 127,116 29,938 621,920
Expenditures for passenger facility charge approved projects (126,235) (338,631) (127,116) (29,938) (621,920) Change in passenger facility charges - $
Unexpended passenger facility charges at beginning of quarter - Excess of passenger facility charges collected over
charges expended at end of quarter $_ = =
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Passenger Facility Charges Collected and Expended and Interest Credited Application 20-09-C-00-LGB
Quarters ended December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021 December 31, March 31, June 30, September 30,
2020 2021 2021 2021 Total
Passenger facility charges collected 187,379 737,606 298,200 1,223,185 Excess charges transferred from application 03-02-C-04-LGB (note 4) 12,510,796 5,322,935 1,450,106 1,038,711 20,322,548 Interest credited (note 2) 47.877 25,523 9,539 4,429 87,368 12,558,673 5,535,837 2,197,251 1,341,340 21,633,101
Expenditures for passenger facility charge approved projects (12,558,673) (65,535,837) (2,197,251) (1,341,340) (21,633.101) Change in passenger facility charges - -
=.
Unexpended passenger facility charges at beginning of quarter Excess of passenger facility charges collected over
charges expended at end of quarter
ee accompanying notes to schedules of passenger facility charges collected and expended and interest credited, and report on compliance with requiremer plicable to the passenger facility charge program and on internal control over compliance and schedules of passenger facility charges collected and expend and interest credited.
CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Notes to Schedules of Passenger Facility Charges Collected and Expended and Interest Credited
Year ended September 30, 2021
(1) Basis of Accounting
The schedules of passenger facility charges (PFC) collected and expended and interest credited are prepared on the basis of cash receipts and disbursements, as prescribed by Sections 9110 and 9111 of the Aviation Safety and Capacity Expansion Act of 1990, issued by the Federal Aviation Administration (FAA) of the U.S. Department of Transportation, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles.
PFC collected includes amounts collected by the airlines and transferred to the City of Long Beach Airport Enterprise Fund (the Airport). Expenditures for passenger facility charge approved projects are presented on a cash basis and include only the expenditures for approved PFC projects. (2) Interest Credited
Interest credited represents interest income allocated to the PFC Program (the Program) based on the ratio of the Program's unexpended PFC cash balance to the Airport's total cash and investments balance included in the pooled cash funds of the City of Long Beach. The Program's interest is allocated to each application based on the applications expenditures in proportion to the total program expenditures. (3) New Application
On November 5, 2020, the Airport received approval for Application 20-09-C-00-LGB to impose and use PFC funds for eight projects. Application 20-09-C-00-LGB covers the following projects: Checked Baggage Inspection System, Baggage Claim Improvements, Taxiway B (Future Taxiway E) Vehicle Service Road Construction, Taxiway L Reconstruction, ARFF Vehicle Replacement, Electric Ground Support Equipment Chargers, Meet/Greet Plaza Improvements and Ticketing Lobby. Collection of PFC under this application follows previously approved Application 20-08-C-00-LGB. (4) Transfers of Excess Charges to Other Applications
The Airport's policy is to match PFC charges collected and interest earned (collectively referred to as PFC collections) with expenditures from approved PFC projects. Any excess PFC collections over eligible expenditures are reported in application 03-02-C-04-LGB. To the extent there are cost adjustments, PFC collections are transferred between appropriate applications to adhere to the Airport's policy.
For the year ended September 30, 2021, the Airport transferred a portion of unused PFC funding from application 03-02-C-04-LGB to fund approved projects in application 11-06-U-00-LGB, application 20-08-C- 00-LGB and application 20-09-C-00-LGB.
9 CITY OF LONG BEACH AIRPORT ENTERPRISE FUND
Schedule of Findings and Responses
Year ended September 30, 2021
(1) Summary of Auditors' Results
Airport Financial Statements
a. Type of report issued on whether the financial statements were prepared in accordance with generally accepted accounting principles: Unmodified
b. Internal control deficiencies over financial reporting disclosed by the audit of the financial statements:
• Material weaknesses: No
• Significant deficiencies: None Reported
c. Noncompliance material to the financial statements: No Passenger Facility Charges Program
d. Internal control deficiencies over major programs disclosed by the audit:
• Material weaknesses: No
• Significant deficiencies: None reported
e. Type of report issued on compliance for major programs: Unmodified Audit findings that are required to be reported in accordance with Passenger Facility Charges Program:
No
(2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards
None
(3) Findings and Questioned Costs Relating to Federal Awards None
10